Tag Archives: Treasury bills and bond rates

Sri Lanka keeps rates steady to support a sluggish economy

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

DECEMBER 28, 2017

COLOMBO, Dec 28 (Reuters) – Sri Lanka’s central bank kept its benchmark interest rates unchanged on Thursday, saying inflation and private sector credit growth have cooled to a manageable level as policy makers focus on supporting a slowing economy.

The monetary authority said high food prices caused by supply disruptions could keep headline inflation somewhat elevated in the immediate future, but prices are expected to return to the desired level towards the end of first quarter of 2018.

“Although near term growth prospects remain subdued, it is anticipated that the economy would recover in 2018 due to continuous surge in exports and investments induced by foreign direct investments,” the central bank said in a statement.

As widely expected, the central bank kept the standing deposit facility rate (SDFR) at 7.25 percent and standing lending facility rate (SLFR) at 8.75 percent. The previous rate increases have dragged on the $81 billion economy, which grew at an annual pace of 3.7 percent in the first nine months of 2017, lagging the 4.0 percent growth in the year-ago period.

In a post-policy press briefing, central bank chief Indrajit Coomarswamy said growth is expected to come in below 4 percent for this year, shaving off further from its downgrade last month of output to expand between 4 percent and 4.5 percent.

The original 2017 growth forecast was 5.0 percent. The country was hit by the most severe drought in 40 years in the first quarter and the worst flooding in 14 years in May.

The central bank said the yields on government securities have eased from their peak, correcting some disparity that existed between the policy rates and the yields on sovereign securities.

The International Monetary Fund (IMF) earlier this month urged Sri Lanka to maintain a tightening bias on monetary policy until clear signs emerge that inflationary pressures and credit growth are moderating. Coomaraswamy last month told Reuters that the monetary authority does not see a need for a rate rise because core inflation is running low. L3N1NY51C]

The central bank has said it wants to curb credit growth to 15 percent by year-end. Annual private sector credit growth slowed to 15.4 percent in November, well off a near four-year high of 28.5 percent hit in July 2016.

Consumer inflation was up 7.6 percent in November from a year earlier, slowing from a record high of 7.8 percent hit in the previous month. Core inflation, which excludes volatile commodities, slowed to 5.2 percent last month from 5.8 percent in October.

“At the moment things are in line. The concern is that the GDP has slowed down and the credit growth is also slowing down. If the slow down continues, there is a possibility of cutting rates,”said Dimantha Mathew, head of research at First Capital Holdings.

But he said the central bank would be watchful until the long-delayed local government election scheduled for Feb. 10.

The central bank has tightened monetary policy four times since December 2015 through March this year to fend off pressure on the fragile rupee and curb stubbornly high credit growth that stoked inflation.

 

The comments on this report are provided by the Capital Markets Research Unit of First Capital Holdings PLC an investment bank in Sri Lanka.

The company operates in the capital markets of Sri Lanka in government securities – treasury bills and bonds, stock brokering and share market investments, asset management, private wealth management, retirement planning, personal financial planning, unit trust, margin trading, capital market research, trustee services, corporate finance advisory services including corporate debt structuring (debentures, trust certificates, commercial papers), valuations, restructuring, mergers and acquisitions, initial public offerings (IPOs) and project advisory.

The First Capital Group consists of First Capital Treasuries PLC, First Capital Limited, First Capital Markets Limited, First Capital Asset Management Limited and First Capital Equities (Private) Limited covering Colombo, Negombo, Matara, Kandy and Kurunegala.

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka.

Sri Lankan stocks hit 3-wk closing high in holiday-thinned trading

DIMANTHA MATHEW, HEAD OF RESEARCH AT FIRST CAPITAL HOLDINGS PLC, SPEAKS TO REUTERS

DECEMBER 27, 2017

COLOMBO, Dec 27 (Reuters) – Sri Lankan shares touched a near three-week closing high on Wednesday as investors waited for clues from the central bank’s monetary policy review later in the week, with trading muted by the holidays after Christmas.

Sri Lanka’s central bank is expected to keep its key interest rates unchanged this week, a Reuters poll showed, as policymakers focus on supporting the slowing South Asian economy while remaining vigilant to still high inflationary pressures.

The Colombo Stock Index ended 0.14 percent firmer at 6,359.06, its highest since Dec. 8.

“Trading blue chip counters moved up slightly helping the index to end positive but the market is very dull as most of the brokers and investors are on holiday,” said Dimantha Mathew, head of research at First Capital Holdings.

Shares in Peoples Leasing Plc rose 0.6 percent, while Overseas Realty Plc ended 2.9 percent higher and Hemas Holdings Plc gained 0.8 percent.

Turnover stood at 263.3 million rupees ($1.73 million), just above a quarter of this year’s daily average of 920.5 million rupees.

Foreign investors sold 130.1 million rupees net worth of shares on Wednesday, but they have bought 18.2 billion rupees net worth equities so far this year. ($1 = 152.6000 Sri Lankan rupees) (Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

First Capital is an investment bank providing a full range of financial advisory and services. The Company’s research deliver heightened perspective in fundamental research aiding Share Market Investment in Sri Lanka. The Company’s best-in-class research team provide dynamic reports including economic reviews and proprietary research, encompassing fundamental, quantitative and technical analysis. With fundamental research coverage of 62 listed securities (reflecting approximately 65% market capitalization) across 15 sectors in Share Market Investment in Sri Lanka

ICRA Lanka assigns [SL]A-(Stable) outlook to First Capital Treasuries Limited

ICRA Lanka Limited, a wholly owned subsidiary of ICRA Ltd, a group company of Moody’s Investors Service has assigned the Issuer rating of [SL]A- (pronounced SL A minus) with a stable outlook to First Capital Treasuries Limited (FCTL or the company). ICRA Lanka has also assigned the [SL]BBB+ (pronounced SL triple B plus) rating with stable outlook to the LKR 500 Mn Subordinated Unsecured redeemable Debenture programme of the company.

ICRA-lanka-rating
The ratings factor in FCTL’s position as an established Standalone Primary Dealer in Sri Lanka with a long track record, established franchise and clientele. The rating also factors in the prudent internal control and processes, along with the adequate risk management systems put in place, which is commensurate in relation to the risks intrinsic to a Primary Dealer’s business. The ratings also factor in FCTL’s comfortable liquidity position due to liquid nature of the portfolio and availability of sanctioned bank facilities. ICRA Lanka notes that while the portfolio of the company has minimal credit risk, the same however is susceptible to adverse movements in the interest rates. The rating takes note of the improvement in the financial performance of the company during FY2015, due to favourable interest rate scenario, which resulted in trading gains for the company; however the same is likely to moderate in the current financial year as the market interest rates are likely to remain largely range-bound or move upwards. In the above context, ICRA Lanka also notes that FCTL’s portfolio duration, which had remained largely conservative in the past increased to 3.7 in March 2015 (3.2 in June 2015); this is likely to make its profits susceptible to unfavourable interest rate movements, if the same occurs within a short time span. Nevertheless, FCTL’s established risk management system, its experienced dealing team and, its investment committee, which largely consists of the senior management and Board of Directors, reviews the various risks regularly thus mitigating risks to an extent. ICRA Lanka notes that the company’s regulatory capital adequacy is comfortable at 21.8% as in March 2015 vis a vis the regulatory requirement of 8%; however FCTL’s gearing has generally been higher than the industry average and, stood at about 10.2 times in March 2015 (5.9 times in June 2015) The company’s regulatory capitalization is comfortable to absorb the losses, if any, on the current portfolio due to unfavorable interest rate movements. ICRA Lanka further notes that there is scope for FCTL in improving its effective participation in the primary market; trading gains in FY2015 was largely from the secondary market transactions. Further, the ratings take cognisance and would closely monitor the developments on the outstanding contingent liabilities (Tax demands), which stood at about 20% of the net-worth as in March 2015.

FCTL’s portfolio as in March 2015 stood at about LKR 16 Billion, the same reduced to about LKR 10 Billion in June 2015 as the company brought down its portfolio holdings as the interest rate scenario is likely to remain largely range-bound or move upwards going forward, in the current financial year. The portfolio consists of Treasury bills and bonds, which do not carry credit risk and are highly liquid assets. The company is expected to deal only with government securities going forward also. However, FCTL is exposed to the counter party risks on its reverse repo exposures which were largely concentrated to about 7-8 entities as in March 2015.The company however closely monitors its exposures and takes proactive measures to mitigate the impact of the above mentioned risks. ICRA Lanka however notes that the company has an established clientele and had undertaken transactions with more than 50 entities during the year apart from the retail participants.

The company also has access to over 2500 clients of the First Capital Group (First Capital Holdings PLC and its subsidiaries).The First Capital Group entities have interests in margin trading, stock broking, asset management, corporate debt structuring and other
investments banking activities. The size of these group entities presently however is quite modest in relation to FCTL.

During FY2015, the company’s overall profitability improved as trading income increased sharply from LKR 227 Mn in FY2014 to LKR 900 Mn, while interest income remained largely stable. The above support the improvement in the overall profits of the company during the year as the operating expenses increased on account of bonus payments to employees. Consequently, FCTL’s PAT as a proportion of average assets improved to 5.1% in FY2015 from about 4.2% in FY2014. ICRA Lanka notes the company’s profitability performance in the current financial year is expected to moderate as trading gains are likely to be lower than in FY2015. FCTL’s portfolio consists of highly liquid assets, which along with the sanctioned bank lines of about LKR 1 billion with the First Capital Group provides comfort from a liquidity perspective.
Company Profile
Incorporated in the year 1982, FCTL is a Licensed Primary Dealer in Sri Lanka. The company is 94.4% held by First Capital Limited, while First Capital Limited is in-turn 99.9% held by First Capital Holdings PLC. First Capital Holdings PLC is 74.9% help by Dunamis Capital PLC, which is the ultimate parent of FCTL.

During FY2015, FCTL reported a net profit of LKR 730 Mn on a total asset base of LKR 16,096 Mn vis a vis a net profit of LKR 518 Mn on a total asset base of LKR 12,552 Mn.

In the three months ended June 2015, the company reported a net profit of LKR 107 Mn on a total asset base of LKR 10,630 Mn.
September 2015

First Capital Wealth Fund recognized as best performing Fixed Income Unit Trust for second year

First Capital Asset Management Limited, Managers of the First Capital Wealth Fund, announced a dividend of Rs. 140 per unit.
The First Capital Wealth Fund has been recognized as Sri Lanka’s best performing Fixed Income Unit Trust for 2014 and 2013, as per statistics issued by the Unit Trust Association.

With an annualized yield of 15.48 percent (as of 31st March 2015) the First Capital Wealth Fund, which invests in debt and government securities, declared dividend representing 95.9 percent of net profit after tax for 11 months ending 28 February 2015.

The First Capital Money Market Fund launched in September 2014 similarly displayed a remarkable performance with an annualized yield of 7.09 percent (as of 31st March 2015).

The fund declared a dividend of Rs. 18.50 per unit. The fund invests in short term fixed income instruments with a maturity for less than a year and paid a dividend representing 95.7 percent of net profit after tax for six months ended 28 February 2015.

“The successful growth of the unit trust funds under our management is attributed to a tripartite combination of prudent management, an astute assessment of market opportunities and leveraging on interest rate fluctuations,” said Dilshan Wirasekara, Chief Executive Officer of First Capital Holdings PLC.

“As a fully-fledged Investment Bank specializing in debt market services and leading non-bank primary dealer in Sri Lanka, we will continue to work closely with our stakeholders to maintain a conducive investment environment and provide competitive returns for our investors. With specialized knowledge and industry expertise garnered through our position and experience in the market, we are confident that the unit trusts managed by First Capital Asset Management Limited will continue to reap the rewards of timely, well-informed investments,” concluded Wirasekara.

First Capital Asset Management Limited is a Securities and Exchange Commission approved fund manager. The company specializes in managing investments for high net worth individuals, trusts and companies. The funds are regulated by the Securities and Exchange Commission of Sri Lanka and supported by the Trustee services of the Bank of Ceylon.

First Capital Treasuries announces Rs.500 mn Debenture Issue

First Capital Treasuries Limited, a Primary Dealer licensed and appointed by the Central Bank of Sri Lanka and a subsidiary of First Capital Holdings PLC, has announced that it intends to issue Subordinated, Unsecured, Redeemable Debentures with a principal value of Rs.500 million maturing in five years and bearing an interest rate of 9.5% per annum payable annually. The issue will open on January 27, 2015.
Debentures are priced at a face value of 100 each and will be listed on the Colombo Stock Exchange. The debenture issue is rated BBB+ while the issuer, First Capital Treasuries Limited, is rated A- by Lanka Rating Agency. First Capital Limited, the Corporate Debt Structuring and placement arm of the group, will be managing the issue and Bank of Ceylon will act as Trustee to the issue.
Dilshan Wirasekara, Chief Executive Officer of First Capital Group, said the company plans to utilize the funds raised through the debenture issue to achieve long term funding base of the company by way of tier 2 capital and increase capital adequacy, which will allow the company to grow its core business and allow further leverage on government securities whilst being well above the regulatory directives by Central Bank of Sri Lanka.
First Capital Treasuries is licensed and appointed by the Central Bank of Sri Lanka to deal exclusively in Government Securities and currently stands at a commanding position as the leading non-bank Primary Dealer in the country.
The company was incorporated in August 1982 and is the primary dealer arm of First Capital Holdings PLC, an investment bank pioneer in debt and equity markets.
“We have done remarkably well during the current financial year and as the pioneer and leading non-bank Primary Dealer, we are extremely proud that we are the first Primary Dealer to offer a listed debenture to all our valued investors,”Wirasekara said.